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How do you understand our democratic process operates? It could be along the lines of this. The public votes for MPs. They debate and pass bills. Should a majority is secured, the bills pass into law. Statutes are enforced by the courts. Simple as that. However, that used to be how it operated in the past. Those days are over.

The Rise of Secret Tribunals

Today, overseas companies, and the billionaires that control them, are able to litigate against nation states for the regulations they pass, at private courts staffed by corporate lawyers. The cases are conducted behind closed doors. In contrast to domestic courts, these tribunals allow no right of appeal or oversight by judges. The general public are unable to file a case to them, nor can our government, or even businesses headquartered in this country. The door is open solely for businesses based overseas.

When a secret court rules that a government measure may compromise the corporation’s projected profits, it can award financial penalties of hundreds of millions, running into billions.

This compensation are based not on tangible damages but funds the panel members conclude the company might otherwise have made. The state could be forced to rescind the measure. It is deterred from passing future laws in that area, for fear of facing litigation.

A System Growing Exponentially

Record numbers of legal actions are being filed, as firms take cues from each other, and hedge funds finance suits in return for a share of the takings. The consequence? Democratic sovereignty and democratic governance are turning into prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can trump national legislation and the rulings made by legislatures is that this stipulation has been inserted – without public consent, and frequently under a climate of extreme secrecy – into bilateral investment treaties.

A Specific Example: The Whitehaven Coalmine

Twelve months ago, a conservation group secured a significant win at the senior court. The justice ruled that schemes to dig the first new deep coal mine in the UK for a generation, in Cumbria, had been wrongly permitted by the previous government, which had endorsed the extraordinary assertion that the mine could have no consequence on national carbon targets. The incoming administration later cancelled the permission the former government had issued. Today, this success is under threat by an foreign court answering to no one but the corporations petitioning it.

Last August, a firm whose final controllers reside in the offshore financial centre lodged a claim against the UK government. Recently a tribunal in Washington DC was convened to consider the case.

The company is seeking compensation from the UK for the revenue it might have made if the mine had been permitted to commence operations. The public has no idea how much this sum represents. What legal team is serving as its counsel in opposition to the UK administration? A member of parliament, and previous senior legal advisor in the previous government, that great patriot Sir Geoffrey Cox. The state enacts a policy, the national judiciary supports it, then a foreign company disputes it through an undemocratic offshore tribunal, and a elected official represents its behalf.

The Russian Lawsuit

Simultaneously that the panel on the coalmine case was appointed, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case so far, but it appears probable that he’ll use the arbitration process to fight the penalties the UK imposed on him subsequent to the invasion of Ukraine. He has started suing a small nation on these grounds, demanding sixteen billion dollars: half that nation's annual revenue. Part of the lawyers on his side? Cherie Blair, spouse of the former British prime minister.

Trade specialists contend that the EU’s procrastination in utilising seized state funds as security for its loan to Ukraine arises from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, secretive influence over sovereign states may be obstructing the money Ukraine urgently requires.

Empty Promises and Mounting Risks

We were assured that these scenarios wouldn’t happen. Years ago, a government leader, promoting the largest and riskiest of all investment pacts, told us: “Britain has agreed to trade agreement after trade deal and we have never seen a issue in the past.” An expert on this topic described activists of “exaggeration … the truth is, ISDS barely touches the UK much”. The overall message seemed to be that solely developing countries had to worry about such legal actions. Cautionary notes that “as corporations begin to understand the authority bestowed upon them, they will turn their attention from the weak nations to the wealthy nations” were met with scepticism.

That threat is now a reality. Recently, oil and gas and mining firms have filed a historic level of claims against nations rich and poor, challenging – similar to the Cumbrian coalmine – government attempts to stop environmental catastrophe. Companies have to date won one hundred and fourteen billion dollars via ISDS, of which energy giants have secured the majority. That represents the combined GDP